Forex price charts: key aspects

05Apr

You do not like charts? You just do not know how to use them!

Indeed, looking at the charts you might be hesitant to use them. It seems that only professionals can understand what they mean. However, it is just your first impression. Each chart is designed to facilitate trading.

Due to the charts, the data expressed in numbers can become visually appealing and easier to interpret.

A person working in the currency market cannot avoid price charts. Price charts provide information on changes in the market, movement of price, and trends. The charts save you time, enabling you to avoid making analyses and calculations. You still do not like charts? I will give you tips on how to use them.

Design data for plotting a chart

Price charts are designed to show changes in data during certain time periods. In order to use a chart we need some information. We advise you to remember the data required for developing a chart.

OPEN – opening price – the price of the instrument at the beginning of the trading period.

CLOSE – closing price – the price of the instrument at the end of the trading period.

HIGH – maximum price for a certain time period.

LOW – minimal price of a certain time period.

VOLUME – the number of contracts concluded during certain time period.

Using this data you can find points on the chart and connect them in the line, which will reflect changes of the price of instrument. You should do the same for the second instrument and after that compare the curves.

Types of price charts

There are many different types of price charts. Some of them, such as line charts, bar charts or Japanese candlesticks, are used widely; such as equivolume and point and figure charts, renko and kagi charts and many others are not very popular.

You can use Forex charts on real-time mode due to special programs and indicators. Price chart is a part of the technical analysis.

In this article we will review three most popular price charts.

Line chart

In other words this chart is called a linear graph.

This type of the price chart is the easiest to understand.

That is why we recommend starting your trading experience with the line chart. The chart is based on opening and closing prices for a certain time period. You find data points on the chart and connect them in a line. The picture you receive will help you adequately react to the changes in price.

Barchart

This type of price chart can look scary; however, if you understand it you will find it simple. In order to use this chart you will need to know opening and closing prices, minimum and maximum price of the instrument in the certain time period. Maximum is the upper point on the chart, minimum is the lowest point on the chart. On the left-hand side of them we indicate opening price, on the right-hand side- closing price.

Japanese candlesticks

Candlestick charts were developed by Japanese trader Munehisa Homma in XVII century and since that time they have been popular among traders. Candlesticks are composed of the body and shadow. The chart is similar to the bar chart. It also represents low and high, opening price and closing price. However, characteristic feature of the Japanese candlesticks is the presence of the “body” and “shadow”. If the time period ends with the decline in price, the “body is filled with color,” if the price rises, the body is hollow (does not have color). Shadow is the price fluctuation during selected time interval. Shadow is marked as a long thin line above or below the body.

Best regards and good luck in trading!

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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